Employment Growth from Public Support of Innovation in Small Firms

Contents

vii Contents Acknowledgments xi 1 Introduction 1 The Prevailing Economic Stage 1 An Innovation-Based Economic Growth Strategy 3 Government’s Role in Innovation 5 An Overview of the Book 10 2 Small Business Innovation Research Program 19 Evolution of a Policy Emphasis on Innovation in Small Firms 19 The Creation of the SBIR Program 21 Economic Role of the SBIR Program 24 Employment Growth and the SBIR Program 29 3 National Research Council Database 33 Background on the Database 33 Variables in the Database 34 Issues of Sample Selection Bias 35 Cross-Agency Analyses 36 Conducting Research in the Absence of SBIR Funding 37 Project-Specific Employment Growth from SBIR Awards 42 4 Project-Specific Employment Effects from SBIR Awards 45 Descriptive Statistics on Retained Employees 45 Interpretation of the Findings 46 Static Model of Retained Employees 47 Conclusions 56 5 Quantifying Long-Run Employment Growth from 59 SBIR Funding Counterfactual Model of Employment Growth 60 Testable Hypotheses 62 Econometric Results 63 Interpretation of the Findings 67 viii 6 Factors Related to Employment Growth from SBIR Funding 81 Construction of New Summary Variables 82 Explanatory Variables and the Estimated Effects 84 Interpretation of the Findings 88 7 The Exploitation of SBIR-Induced Intellectual Capital and 91 Employment Growth Interpretation of the Descriptive Statistics 92 8 Conclusions 103 Appendix A: Glossary of Variables and Descriptive Statistics 109 Appendix B: Technical Appendix 127 References 159 Authors 167 Index 169 About the Institute 177 ix Figures 1.1 Spillover Gap between Social and Private Rates of Return to R&D 8 2.1 Spillover Gap between Social and Private Rates of Return to 26 SBIR-Funded Research 2.2 Private Risk Reduction Resulting from SBIR Funding 27 5.1 Calculation of g from Equation (5.2), by Agency 68 Tables 2.1 SBIR Awards and Dollars, Fiscal Year 2005 25 3.1 Population of SBIR Phase II Projects, 1992–2001 34 3.2 Descriptive Statistics on the National Research Council Survey 35 of Phase II Awards 3.3 Examples of SBIR Phase II Awards 38 3.4 Responses to the Counterfactual Question, “In your opinion, 41 in the absence of this SBIR award, would your firm have undertaken this project?” 4.1 Percentage of Projects with Firms Retaining the Stated Numbers 46 of Employees after Completion of Phase II Projects 5.1 Actual Growth Rate of Employees after the Firm Received a 74 Phase II Award 5.2 Mean Actual (emptA 05 ) and Predicted (emptP 05 ) Employment 75 in 2005 for Phase II SBIR Award Recipients, by Agency 5.3 Ratio of the Logarithmic Metric, diff, for SBIR-Induced 75 Employment Growth to the Standard Error of the Forecast 5.4 Mean SBIR-Induced “Employment Gain” by Agency 76 (standard deviation) 5.5 SBIR-Induced “Employment Gain” by Agency, Using Just a 77 Single Sampled Award for Each Firm 6.1 Descriptive Statistics for Constructed Variables for Outside 83 Finance and Commercial Agreements: Mean, (Std. dev.), {range}, [n] x 7.1 Agreements with Other Firms or Investors: Percentage of the 93 Random Sample of Phase II Projects Answering the Question, “As a result of the technology developed during this project, which of the following describes your firm’s activities with other firms and investors? (Select all that apply.)” 7.2 Descriptive Statistics for the Presence of Agreements 99 7.3 Descriptive Statistics for Sales Categories with and without U.S. 100 and Foreign Agreements A.1 Glossary of Variables for Tables in the Book 109 A.2 Descriptive Statistics for the Variables—Mean, (Std. dev.), 116 {Range} B.1 Construction of the Random Sample of Projects from Tables 3.1 128 and 3.2: Phase II Projects (11,214 in total) for All Agencies, 1992–2001 B.2 Negative Binomial Regression Results from Equation (4.2) for 131 the Larger Samples B.3 Negative Binomial Regression Results from Equation (4.2) for 137 Smaller Samples with Commercial Agreement Variables B.4 Percentage Change in retainees, for Statistically Significant 143 Changes, Given Change in the Explanatory Variable, Other Things Being the Same B.5 Descriptive Statistics for the Complete Sample of Respondents 146 and Nonrespondents for the Employment Growth Model and Probability of Response Model B.6 Results from the Firm Employment Growth Model, 151 Equation (5.4), with Control for Response B.7 Coefficients from the Performance Model in Equation (6.1) 154 ...